FedEx and Dollar General Collaboration – Reducing Delivery Costs for Rural Locations?

June 19, 2019


FedEx announced this week that they were adding 8,000 Dollar General Stores to their network of package drop-off, return, and hold-for-pickup options. A FedEx spokesperson told Supply Chain Dive, “Before our alliance with Dollar General, 55% of people living in rural communities lived within 5 miles of FedEx hold location.” Now, the company estimates “90% of Americans will ultimately live within five miles of a FedEx hold retail location,” when the initiative launches later this summer.

The FedEx and Dollar General partnership should benefit the retailer, the customer and the carrier. According to Kantar Retail, about 73% of rural consumers—defined as those who drive at least 10 miles for everyday shopping—are now buying online versus 68% two years ago. In 2015, 30% were members of Amazon Prime, up from 22% in 2014. A WSJ article from 2016, E-Commerce Is a Boon for Rural America, but It Comes with a Price, notes that while e-commerce is great for rural America, it is expensive for retailers and delivery companies.

Indeed, the article cites a shipment example from Spend Management Experts. Shipping a container of Tide Pods laundry detergent from Atlanta to urban Oklahoma City is estimated to cost a retailer $11.44—already more than the approximately $11 price of the item itself whereas shipping the pods to Mangum, OK costs $15.65.

Additional surcharges, added to delivery charges to rural areas, have continued to increase since 2016. DAS or Delivery Area Surcharge is a per carton fee for deliveries to higher cost-to-serve zip codes, which rural locations are often considered. The actual per carton charge is based on whether the delivery is going to a commercial or residential destination.

For FedEx, these surcharges added to base delivery charges are:

 

According to our Vice President of Strategic Analysis, Paul Steiner, with this announcement, FedEx could reduce their costs to serve as the more expensive single piece Residential Deliveries can now be moved to multi-Piece Commercial Deliveries via Dollar General. In addition, this will greatly cut down driving costs between Rural and Super Rural Residential stops. Plus, it can also create an opportunity to deliver packages on the first try instead of performing three attempts for Not-In shippers and receivers.

To find out how this latest collaboration between FedEx and Dollar General Stores could impact your shipments, contact us at solutions@spendmgmt.com.

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FedEx and Dollar General Collaboration – Reducing Delivery Costs for Rural Locations?

June 19, 2019


FedEx announced this week that they were adding 8,000 Dollar General Stores to their network of package drop-off, return, and hold-for-pickup options. A FedEx spokesperson told Supply Chain Dive, “Before our alliance with Dollar General, 55% of people living in rural communities lived within 5 miles of FedEx hold location.” Now, the company estimates “90% of Americans will ultimately live within five miles of a FedEx hold retail location,” when the initiative launches later this summer.

The FedEx and Dollar General partnership should benefit the retailer, the customer and the carrier. According to Kantar Retail, about 73% of rural consumers—defined as those who drive at least 10 miles for everyday shopping—are now buying online versus 68% two years ago. In 2015, 30% were members of Amazon Prime, up from 22% in 2014. A WSJ article from 2016, E-Commerce Is a Boon for Rural America, but It Comes with a Price, notes that while e-commerce is great for rural America, it is expensive for retailers and delivery companies.

Indeed, the article cites a shipment example from Spend Management Experts. Shipping a container of Tide Pods laundry detergent from Atlanta to urban Oklahoma City is estimated to cost a retailer $11.44—already more than the approximately $11 price of the item itself whereas shipping the pods to Mangum, OK costs $15.65.

Additional surcharges, added to delivery charges to rural areas, have continued to increase since 2016. DAS or Delivery Area Surcharge is a per carton fee for deliveries to higher cost-to-serve zip codes, which rural locations are often considered. The actual per carton charge is based on whether the delivery is going to a commercial or residential destination.

For FedEx, these surcharges added to base delivery charges are:

 

According to our Vice President of Strategic Analysis, Paul Steiner, with this announcement, FedEx could reduce their costs to serve as the more expensive single piece Residential Deliveries can now be moved to multi-Piece Commercial Deliveries via Dollar General. In addition, this will greatly cut down driving costs between Rural and Super Rural Residential stops. Plus, it can also create an opportunity to deliver packages on the first try instead of performing three attempts for Not-In shippers and receivers.

To find out how this latest collaboration between FedEx and Dollar General Stores could impact your shipments, contact us at solutions@spendmgmt.com.

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